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Alliant Techsystems Inc. (ATK - Analyst Report) reported fourth quarter fiscal 2013 pro forma earnings of $2.22 per share, up 31.4% from the year-ago period. Lower interest expense, falling tax rate owing to extension of the federal R&D tax credit and solid performance by the Sporting business led to the upswing in earnings.

Quarterly earnings also outpaced the Zacks Consensus Estimate by 12.1%.

GAAP earnings per share were $2.23 compared with $1.86 per share in the prior-year quarter. The difference of a penny between pro forma and GAAP earnings was due to a one-time gain from sales and profits associated with the Radford Army Ammunition Plant.

Fiscal 2013 earnings in contrast decreased 7.7% to $7.10 from last year primarily due to a decline in overall sales owing to unfavorable business from the defense segment. It also lagged the Zacks Consensus Estimate of $8.08.

2013 GAAP earnings were $8.34 per share versus $7.93 per share in the prior year. The variance in GAAP and pro forma earnings of $1.24 was due to a 90 cent gain associated with Radford Army Ammunition Plant and a 34 cent gain from tax settlement.

Total Revenue

Alliant's total revenue in the fourth quarter fiscal 2013 was $1,153.9 million, surpassing the Zacks Consensus Estimate by 7.2%. Reported revenue however trailed the year-ago figure by 12%.

Revenue dropped owing to the combined downturn in Aerospace and Defense sales, partially offset by robust bookings in the Sporting division.

Revenue in fiscal 2013 also plummeted 5.4% year over year to $4,362.1 million. Revenue nevertheless beat the Zacks Consensus Estimate by 7.7%.

Segmental Update

Aerospace Group: Sales from this segment in the quarter declined 5% to $342 million from the prior-year quarter. The year-over-year shortfall was due to a decline in NASA spaceflight programs.

Defense Group: This segment reported sales of $492.0 million, down 27% year over year due to a decrease in domestic and overseas sales at the small caliber systems and closure of international contracts from the Armaments division.

Sporting Group: This segment registered a 14% increase in sales to $320 million from the prior-year quarter. The sales growth can be attributed to expansion in unit volume and ammunition price hike declared in Jun 2012.

Operational Highlights

Alliant’s cost of sales was $910.5 million, down 14.8% from the year-ago quarter. Gross profit moved up marginally to $243.4 million from the prior-year period.

Interest expenses totaled $13.9 million, down 28% year over year mainly due to the declining debt level.

Financial Update

Cash and cash equivalents as of Mar 31, 2013, were $417.3 million versus $568.8 million as of Mar 31, 2012.

Long-term debt as of Mar 31, 2013, was $1.02 billion versus $1.3 billion as of Mar 31, 2012.

Cash provided by operating activities at fiscal year-end 2013, was $274 million versus $372.3 million in the comparable year-ago period.

Alliant’s capital expenditure was $96.9 million at the end of Mar 2013, down 20.7% year over year. The company repurchased shares worth $60 million in 2013 and has another $130.0 million remaining in its share repurchase program.

Guidance

Alliant forecast sales for fiscal 2014 in the range $4.05–$4.15 billion while the earnings guidance is set in the band of $7.50–$7.90 per share. The company’s free cash flow is estimated in the range $150–$175 million. The company expects its full-year 2014 capital expenditure to be $125 million.

Other Aerospace and Defense Company Releases

Lockheed Martin Corporation (LMT - Analyst Report) posted first-quarter 2013 operating earnings of $2.48 per share, which surpassed of the Zacks Consensus Estimate by 23.4%.

Raytheon Company (RTN - Analyst Report) reported first-quarter adjusted earnings of $1.56 per share, beating the Zacks Consensus Estimate by 28 cents.

General Dynamics Corporation (GD - Analyst Report) reported first quarter earnings of $1.62 per share, exceeding the Zacks Consensus Estimate of $1.51 per share.

Our View

Alliant Techsystems yet again delivered a positive earnings surprise in the fourth quarter fiscal 2013. The company is expected to thrive on its diversified business, efficient cost management as well as operational efficiency achieved through its realignment strategy.

Further, its healthy dividend payout and effective share repurchase programs will also lead to value accretion for shareholders.

On the flip side, uncertainties related to federal budget cutbacks would constrain Alliant’s future opportunities. Alliant Techsystems currently has a Zacks Rank #3 (Hold).

Arlington, VA-based Alliant Techsystems Inc. delivers aerospace and defense products to the U.S. government agencies. The company also supplies ammunition and related accessories to law enforcement agencies and commercial customers.

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